KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR.versusM/S. L.M.L. LIMITED & ORS.

                           · (2010] 6 S.C.R. 419

            KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR.                  A
                                      v.
                        M/S. L.M.L. LIMITED & ORS.
                      (SLP (Civil) No. 33984 of 2009)
                                MAY 7, 2010
....-.                                                                 B
             [ALTAMAS KABIR, CYRIAC JOSEPH AND C.K.
                     .    PRASAD, JJ.]

             U. P. Electricity Supply Code, 2005 - Clause 4.41 read
         with clause 4.49 - Reduction in contracted load - C
         Deteriorating market conditions - Application for reduction of
         contracted load from 8 MVA to 1.25 MVA with effect from
         01.04.2006, by a public limited company- Meeting between
         two companies to reduce the same subject to certain condition
         - Load reduction approved by Electricity Regulatory D
         Commission - Company declared 'Relief undertaking' as
         also 'Sick unit' - Electricity Supply Company-KESCO raising
         monthly bills based on 8 MVA load thereafter - KESCO
         asking the company to submit Bank Guarantee for arrears of
         amount as per the amended clause 4.49 - Load not reduced E
         since Bond and affidavits submitted by company did not
         secure the outstanding dues - Direction by BIFR to KESCO
         to continue to accept Rs.5 lakhs p.m. against arrear dues
         together with current dues on basis of actual consumption -
         Strict adherence by company to the said order - However, F
         issuance of disconnection notice . .,. Writ petition by company
         seeking direction upon KESCO that load stood reduced from
         01.04.2006 - Allowed by High Court - Interference with -
         Held: Not called for - KESCO, instead of helping the
         company to come out of its financial crisis, prevented it from G
         doing so by refusing to lower the load from 8 MVA to 1.25
         MVA, as agreed upon - In fact, company had been declared
         a 'Relief Undertaking' and a 'Sick Company' - When decision
          was ta!fen to reduce the contract load, unamended Clause.
         4.49 was in existence which provided for submission of either H
                                    419
    420     SUPREME COURT REPORTS                [201 O] 6 S.C.R.

A a Bank Guarantee or a Bond or any other instrument to the
    satisfaction of the licensee of the equal amount of pending
    dues - After amendment, Bond was excluded from the
    provision - Continued insistence of KESCO that Bank
    Guarantee should be provided by the company in respect of
s   its outstanding dues, had the effect of negating the decisions
    to revive the Company - Electricity Act, 2003 - s. 5.

         Respondent no.1 is a public limited company
    engaged in the manufacture and sale of two-wheelers.
C   Due to market fluctuations it had to stop its manufacturing
    activities. The respondent company was declared a
    "Relief Undertaking" uls. 3(1) of the U.P. Industrial
    Undertaking (Special Provisions for Prevention of
    Unemployment) Act, 1966. The respondent no.1-company
    applied to the petitioner-State Electricity Supply
D   Company for reduction of the contracted load from 8 MVA
    to 1.25 MVA from 1st April, 2006. The decision was taken
    by two companies to reduce the load with certain
    conditions. The Electricity Regulatory Commission
    approved the reduction of the load. However, electricity
E   bill was raised for the month of May, 2006 on basis of 8
    MVA load. The respondent paid the bill on basis of 1.25
    MVA load. The respondent company was also declared
    a "Sick Company" under Sick Industrial Companies
    (Special Provisions) Act, 1985. The load was not reduced
F   since the outstanding dues of the respondent company
    were 8.42 crores as on 31st March, 2006. The petitioner
    wrote to the respondent to submit a Bank Guarantee for
    arrears of the amount as per the amended clause 4.49 of
    the U.P. Electricity Supply Code, 2005 so that action could
G   be taken to reduce the load from 8 MVA to 1.25 MVA.
    Thereafter, the respondent company restarted its
    manufacturing activities and sought increase of the load
    from 1.25 MVA to 2.25 MVA. The petitioner rejected the
    same since the respondent did not submit the Bank
H   Guarantee for the balance amount. The respondent
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 421
           l.M.L. LIMITED & ORS.
company submitted a Bond stating that the Company               A
was agreeable to make payment of the arrears, if any, to
petitioner upon the directions of the court and the amount
as was decided by the courts. However, since the two
affidavits and the Bond did not secure the outstanding
dues of the petitioners and were also not to its                B
satisfaction, the load was not reduced. The BIFR then
directed the petitioners to continue to accept Rs.5 lakhs
p.m. against the arrear dues together with the current
dues on the basis of the actual consumption and not to
adopt coercive measures to disconnect the supply of             c
electricity. However, the petitioner issued a disconnection
notice. The respondent company filed a writ petition
seeking direction that the load of the respondent
company stood reduced from 8 MVA to 1.25 MVA
pursuant to the then prevalent provisions of Clause             0
4.41(b) of the 2005 Code, with effect from 1st April, 2006,
2.25 MVA with effect from April, 2007 and 2.50 MVA with
effect from August, 2007. The High Court held that the
decision with regard to the reduction of the load of the
respondent company stood approved on 19th April, 2006,
and, accordingly, the effective date of such reduction          E
would have to be reckoned from 1.5.2006. Hence, the
Special Leave Petition.

    Dismissing the Special Leave Petition, the Court
                                                                F
     HELD: 1.1. What is difficult to comprehend is the
inscrutable manner in which decisions arrived at in
common are sought to be negated on account of
bureaucratic lethargy. An order was passed by BIFR u/
s. 22(3) of SICA on 22nd October, 2007, inter a/ia, directing   G
that KESCO would continue to accept Rs.5 lakhs per
month against the arrear dues together with the current
dues on the basis of the actual consumption. What is of
significance is that despite compliance by the
respondent no.1-company with the said order the                 H
    422    SUPREME COURT REPORTS              (2010] 6 S.C.R.

A petitioners continued to raise bills on the respondent-
  company on the basis of 8 MVA load, although, it had
  agreed to reduce the same from 8 MVA to 1.25 MVA with
  effect from 1st April, 2006.[Para 24] [439-B-H; 440-A-B]

B      1.2. This case is an example of how a positive
  decision taken to help a struggling industry to find its feet
  can be scuttled by legalese, although, an agreement had
  been reached between the parties regarding payment of
  the arrears in installments along with the dues, and
  despite the same being duly followed by one of the
C parties to the agreement. The threat to yet again disrupt
  its manufacturing operations looms large on the horizon
  on account of the inability of the respondent No.1-
  company to comply with the provisions of Clause 4.41
  read with Clause 4.49 of the U.P. Electricity Code, 2005.
D On 31st March, 2006, the outstanding dues of the
  respondent-company was Rs.8.42 crores and when
  Clause 4.49 was amended, the respondent-company was
  asked to submit a Bank Guarantee/Bond to secure the
  amount of Rs.10.24 crores outstanding as arrears on that
E date. In compliance thereof, the respondent-company
  duly furnishetf a Bond on 17th June, 2007, which was not
  accepted by the petitioners on the ground that it did not
  secure the outstanding dues of the petitioner No.1 and
  were not to its satisfaction. Although, the petitioners were
F fully aware of the precarious financial condition of the
  respondent-company and having agreed to reduce the
  contract load from 8 MVA to 1.25 MVA, it refused to do
  so on the ground that the Bond provided did not secure
  the outstanding dues, resulting in a vicious circle of
G events. On the one hand, the high MVA load continued
  to contribute to the raising of high electricity bills, which
   the respondent-company was not able to pay, and, on the
   other hand, the respondent-company continued to suffer
  further financial losses on account thereof. [Para 25]
H [440-B-G]
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 423
           L.M.L. LIMITED & ORS.
     1.3. In the amended provisions of Clause 4.49 the A
furnishing of a Bond by way of security was excluded.
However, the discretion not to accept such Bond always
lay with the petitioners, giving them the discretion not to ·
accept the Bond furnished by the respondent-company.
That is exactly what happened in the instant case. While B
agreeing to give the respondent-company the benefit of
a reduced MVA, the petitioners had prevented the
respondent~company from accessing such privilege by
continuing to raise bills on the basis of the high MVA
which the respondent-company apparently was unable c
to bear on account of its financial conditions. As a result,
instead of helping the respondent-company to come out
of its financial crisis, the petitioners prevented the
Company from doing so by refusing to lower the load
from 8 MVA to 1.25 MVA, as agreed upon. It is not the case D
of the petitioners that the agreement which had been
arrived at between the Managing Director of the
petitioners and the Executive Director of the respondent-
com pa ny, had been breached by the respondent-
company. On the other hand, it has been categorically
contended by the company that it had scrupulously E
given effect to the said agreement as also the order of the
BIFR dated 22nd October, 2007 upon the respondent
No.1-company being declared a Sick Industrial Company
under section 3(1)(o) of SICA on 8th May, 2007. [Para 26]
[441-A-F]                                                    . F

     1.4. While passing the impugned order, the High
Court lost sight of the order of the BIFR and confined
itself to the provisions of Clauses 4.41 and 4.49 of the
U.P. Electricity Supply Code, 2005 framed under Section       G
50 of the Electricity Code, 2003. If the respondent No.1-
company is to revive, and, thereafter, survive, a certain
amount of consideration has to be shown, which was
fully realized by the petitioners themselves, but they
allowed themselves to be tied up in knots over                H
      \
    424    SUPREME COURT REPORTS             [2010] 6 S.C.R.


A compliance with the provisions of Clauses 4.41 and 4.49
  which are Rules framed for application in special cases
  in order to help industries which had fallen on difficult
  days, to recoup its losses and to bring its finances on an
  even keel. [Para 27] [441-G-H; 442-A-B]
8      1.5. There is no dispute that pursuant to an
  application made on 31st March, 2006 by the respondent
  no.1-company, praying for the reduction of the contract
  load from 8 MVA to 1.25 MVA with effect from 1st April,
  2006, a Meeting had been held between the Managing
C Director of KESCO and the representatives of the
  respondent-company in which a decision was taken for
  reduction of the load with certain conditions. On the said
  date itself KESCO conveyed its agreement for reduction
  of load to the U.P. Electricity Regulatory Commission and
D sought its formal approval and that no objection was
  raised by the Commission with regard to the said decision
  except to indicate that the said decision would have to
  be implemented strictly in accordance with the Electricity
  Supply Code, 2005. When the decision was taken on 19th
E April, 2006 to reduce the contract load, the unamended
  version of Clause 4.49 of the Code was in existence and
  that the same provided for submission of either a Bank
  Guarantee or a Bond or any other instrument to the
  satisfaction of the licensee of the equal amount of
F pending dues. The only problem which has arisen is
  KESCO's decision not to accept the Bond given by the
  respondent-company on the ground that it did not
  provide sufficient security for the outstanding dues. In
  the totality of the existing circumstances, of which
G l<ESCO was fully aware, the decision not to accept the
  Bond was not in accordance with the decision arrived at
  on 19th April, 2006 to reduce the contract load from 8
  MVA to 1.25 MVA. In fact, the respondent-company had
  been declared to be a Relief Undertaking by the State
H Government on an application dated 24th June, 2004.
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 425
           L.M.L. LIMITED & ORS.                                  {.
Furthermore, soon after the decision was arrived at to A .
lower the contract load, the respondent-company was
also declared as a Sick Company on 8th May, 2007 and
the BIFR, while cons;dering the revival of the respondent-
company by its order dated 22nd April, 2007, directed
KESCO to continue to accept Rs.5 lakhs per month B
against the arrears apart from payment of the current
electricity bills on actual consumption basis and also not
to adopt coercive measures to disconnect the supply of
electricity of the respondent-company. The result of the
continued insistence of KESCO that a Bank Guarantee c
should be provided by the respo~dent no.1-company in
respect of its outstanding du~s, had the effect of
negating the decisions to revive t~e Company. [Para 28]
[442-B-H; 443-A·C]
    1.6. No interference is called for with the impugned      D
order of the High Court. The petitioner-Company will ,not
be prevented from taking appropriate steps against the
respondent-Company in the event the latter Company
commits default in paying the instalments as directed by
the BIFR towards the arrears or in respect of the current     E
electricity bills. [Para 29] [443-D]
     Modern Syntax (I) Ltd. vs. Debts Recovery Tribunal,
Jaipur AIR (2001) Raj 170; Doburg Lager Breweries Pvt. Ltd.
vs. Dhariwal Bottle Trading Co. (1986) 2 SCC 382, referred
                                                              F
to.
                     Case Law Reference:
      AIR (2001) Raj. 170   Referred to.         Para 18
      (1986) 2 sec 382      Referred to.         Para 18      G
    CIVIL APPELLATE JURISDICTION : SLP (Civil) No.
33984 of 2009.
    From the Judgment & Order dated 18.09.2009 of the High
Court of Judicature at Allahabad in CWMP No. 24900 of 2009.   H
        426      SUPREME COURT REPORTS                 [2010] 6 S.C.R.

    A       Parag Tripathy, ASG, Pradeep Misra, Daleep Kumar, D.P.
        Pandey and Manoj K. Sharma for the Petitioners.

!           M.L. Lahoty, Pabank Sharma, Mahesh Aggarwal, Pabam
        K. Sharma and E.C. Agrawala for the Respondents.
    B         The Judgment of the Court was delivered by

             ALTAMAS KABIR, J. 1. The Respondent No.1 is a Public
        Limited Company engaged in the manufacture and sale of two-
        wheelers, scooters and motorcycles, having its registered office
    c   at Panaki Industrial Area in Kanpur, U.P. The Company
        obtained power load from the Kanpur Electricity Supply
        Administration, hereinafter referred to as "KESA'', which was
        extended from time to time. In the year 2006, the sanctioned
        load of the Company was 8 MVA from 132 KV line.
    D       2. On account of a decreasing market the Company
      apprehended that its work force would be directly affected and,
      accordingly, made a representation to the State Government
      for declaring the Respondent-Company as a "Relief
      Undertaking" under Section 3(1) of the U.P. Industrial
    E Undertaking (Special Provisions for Prevention of
      Unemployment) Act, 1966. A Notification was issued by the
      State Government on 24th June, 2004, suspending all
      contracts, agreements and other instruments in force under any
      law, for a period of one year which resulted in a strike disrupting
    F the operations of the company. Consequently, all manufacturing
      activities of the Respondent-Company came to a halt, ultimately
      leading to the declaration of a lockout on 7th March, 2006. As
      a result, on 31st March, 2006, the Respondent-Company
      applied to the Kanpur Electricity Supply Company, hereinafter
    G referred to as "KESCO", for reduction of the contract load from
      8 MVA to 1.25 MVA with effect from 1st April, 2006. On 19th
      April, 2006, a meeting took place between the officers of
                                         I

      KESCO and the Respondent-Company in which a decision
      was taken for reduction of the load with certain conditions. On
    H the said date itself KESCO conveyed its agreement for
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 427
   L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.] .
reduction of load to the U.P. Electricity Regulatory Commission     A
and sought its formal approval.

      3. The Commission did not raise any objection regarding
the decision to reduce the load but it observed that the
agreement which had been reached between the parties was            B
internal to the parties and the same had to be implemented
strictly in accordance with the Electricity Supply Code, 2005.
Thereafter, the Respondent wrote to KESCO on 17th May,
2006, to reduce the load with effect from 1st April, 2006.
However, the electricity bill for the month of May, 2006 based      C
on 8 MVA load was presented to the Respondent on 7th June,
2006. The Respondent immediately sent a letter of protest
indicating that the bill amount ought to have been raised on the
basis of the agreed load of 1.25 MVA. The respondent paid
the bill on the basis of 1.25 MVA load and also invoked the
provisions of the Sick Industrial Companies (Special                D
Provisions) Act, 1985, hereinafter referred to as the "SICA". The
 said reference was registered as Case No.80 of 2006 on 15th
September, 2006 and, thereafter, on 8th May, 2007, the
 Respondent-Company was declared as a sick industrial
company under section 6(3)(o) of the 1985 Act and the IDBI          E
Bank was appointed as the Operating Agency. On 4th October,
2006, KESCO wrote to the Respondent-Company for
submitting a Bank Guarantee for the arrears of the amount as
per Clause 4.49 of the U.P. Supply Code, 2005 so that action
could be taken to reduce the load from 8 MVA to 1.25 MVA. In        F
 response, the Respondent No.1-Company wrote to KESCO
indicating that once the normal work of the factory was restored,
the payment of arrears of electricity dues would be finalized.

     4. On 11th March, 2007, the. Respondent-Company                G
restarted its manufacturing activities and requested KESCO to
increase the load from 1.25 MVA to 2.25 MVA. KESCO,
however, responded on 20th March, 2007, informing the
Petitioners that the load reduction could not be considered
owing to non-submission of the Bank Guarantee by the                H
    428     SUPREME COURT REPORTS                  (2010] 6 S.C.R.


A Respondent-Company for the balance amount of the bill raised
  for the month of May, 2d06. On 3rd August, 2007, a settlement
  was arrived at with regard to the payment of arrears. As the
  respondent was registered as a Sick Unit with the Board for
  Industrial and Financia! Reconstruction, hereinafter referred as
B the "BIFR", the said Board by its order dated 22nd October,
  2007 directed KESCO to continue to accept Rs.5 lakhs per
  month against their arrears, besideJ payment of current
  electricity bills on actual consumption basis, and not to adopt
  coercive measures to disconnect the supply of electricity.
c However, on 6th April, 2009, a disconnection notice was issued
  by KESCO against which the Respondent-Company filed Writ
  Petition No.20499 of 2009 in which an interim order was
  passed by the Allahabad High Court on 22nd April, 2009,
  directing that in case the Respondent-Company continued to
  pay the amount as directed by the BIFR, its electricity supply
0
  would not be disconnected. The said writ petition is still pending
  disposal. However, since, in the meantime, the claim of the
  Respondent-Company for reduction of the load from 8 MVA to
  1.25 MVA with effect from 1st April, 2006, was not decided or
  implemented, the Respondent-Company filed Writ Petition
E No.20499 of 2009, inter alia, for an appropriate writ or direction
  to the effect that the load of the Respondent-Company stood
  reduced from 8 MVA to 1.25 MVA pursuant to the then
  prevalent provisions of Clause 4.41 (b) of the 2005 Code, with
  effect from 1st April, 2006, 2.25 MVA with effect from April,
F 2007 and 2.50 MVA with effect from August, 2007.

       5. Interpreting the provisions of Clauses 4.41 and 4.49 of
  the U.P. Electricity Code, 2005, the High Court came to the
  conclusion that the decision with regard to the reduction of the
G load of the Respondent-Company stood approved on 19th
  April, 2006, and, accordingly, the effective date of such
  reduction would have to be reckoned from the first day of the
  following month, namely, from 1.5.2006, in terms of Clause
  4.41(e) of the Code. The writ petition was, accordingly, allowed
H
 KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 429
    L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]

and it is against such order of the writ court, that the present       A
Special Leave Petition has been filed.

     6. From what has been indicated hereinabove, it will be
clear that the question required to be answered in the present
Petition involves the interpretation of Clause 4.41 read with          8
Clause 4.49 of the U.P. Electricity Supply Code, 2005, framed
under Section 50 of the Electricity Act, 2003. In order to
appreciate the issue raised, the provisions of Clause 4.41 are
reproduced hereinbelow :

    "4.41 Reduction in Contracted load.                                c
    (a) Every application for reduction of contracted load shall
    be made in duplicate to the concerned officer on
    prescribed form (Annex-4.10) along with the prescribed
    processing fee and charges for reduction of load alongwith         D
    the following documents:

      (i)     Work completion certificate and test report from the
              licensed electrical contractor where alteration of the
              installation is involved.
                                                                       E
      (ii)    Maximum demand recorded in the last two billing
              cycles if the meter has the facility to record
              maximum demand and the electricity bill of the
              previous two billing cycles.
                                                                       F
      (iii)   Letter of approval from the Electric-Inspector,
              wherever applicable (or as per rules when framed
              under Section 53).

      (iv)    Copy of the latest paid electricity bill. If matter
              related to dues is pending in court, the procedure       G
              as per Clause 4.49 may be followed.

     (b) The designated authority of the Licensee shall
     communicate to the consumer the decision on his
                                                                       H
    430          SUPREME COURT REPORTS                 [2010] 6 S.C.R.

A         application within thirty days of receipt of the duly completed
          application.

          (c) Afresh agreement for reduced load shall be executed
          for 2 years but the period of compulsory agreement 2 years
B         for the purpose of payment of MCG shall be counted from
          the date of original agreement for the purpose of P.O.

          (d) No refund shall be allowed for the deposited cost of
          the line and substation. However, if the security deposited
          earlier is in excess of the requirement for the reduced load,
c         the excess of the requirement for the reduced load, the
          excess shall be adjusted in future bills.

          (e) The effective date of such reduction shall be reckoned
          from the first day of the following month in which the
D         application has been sanctioned by the licensee.
          (f)                  "

       7.                       Clause 4.49 was amended with
  effect from 14th September, 2006. Accordingly, both the
E unamended provisions of Clause 4.49 and the amended
  provisions are set out hereinbelow :

          Unamended version :
          "4.49. Release of Connection/Load where arrears
F         disputed are stayed by Court/other forums :
          Where there is stay order by any Court, Forum, Tribunal,
          or by Commission, staying the recovery of any dues by
          licensee, and during the operating period of any such order:
G
           (i)     If a consumer sells a premises and an application
                   for release of new connection is made by the
                   purchaser.

                                        Or
H
KANPUR ELECTRICITY SUPPLY.CO. LTD. & ANR. v. 431
   L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]
    (ii)   If any application for enhancement or reduction of     A
           load is made by a consumer.
   the licensee shall release the new connection to such
   consumer and also permit reduction or enhancement of
   loads,                                                         B
   Subject to

           Submission either of Bank Guarantee, or Bonds, or
           any instruments to the satisfaction of licensee of
           equivalent amount of pending dues, by the              c
           applicant, and,
           Agreement with licensee on terms of extension/
           invoking of guarantee, and,    ·
           Levy of surcharge amount on pending dues,              D

   And the application of such consumers shall not be kept
   pending by the licensee."
   Amended version :
                                                                  E
   "4.49. Permanent disconnection/ release of Connection/
   Enhancement and Reduction of Load where arrears
   disputed are stayed by CourVother forums :-
                  .   \


   Where there is a stay order by any Court, Forum, Tribunal,     F
   or by Commission, staying the recovery of any dues by
   licensee, and during the operating period of any such order


    (i)    If a consumer sells a premises and an application
           for release of new connection is made by the           G
           purchaser; or
    (ii)   If any application for new connection, reconnection,
           en-hancement. or reduction of load is made by a
           consumer; or                                           H
    432        SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A          (iii)   If any application for permanent disconnection is
                   made b~ a consumer the licensee shall release the
                   new connection to such consumer and also permit
                   reconnection reduction or enhancement of Loads,
                   as well as allow permanent disconnection.
B
          Subject to

                   Submission of Bank Guarantee to the satisfaction
                   of licensee, of equivalent amount of pending dues,
                   by the applicant or owner, and,
c
                   Agreement with licensee on terms of extension/
                   invoking of guarantee, and

                   Levy of surcharge amount on pending dues,

D         and the application of such consumers shall not be kept
          pending by the licensee."

      8. As will be seen from the above, if any application for
  reduction of load is made by a consumer, such reduction could
E be permitted subject to :

          "Submission either of Bank Guarantee, or Bonds, or any
          instruments to the satisfaction of the licensee of equivalent
          amount of pending dues by the applicant."

F        9. The said condition was replaced in the amended
    provisions by the following condition :
          ··subject to submission of Bank Guarantee to the
          satisfaction of the licensee, of equivalent amount of
          pending dues, by the applicant or owner."
G
         10. It is the difference between the said two provisions,
    whereby the submission of a Bond had been excluded from the
    amended provisions, which has given rise to the disputes in
    the present case.
H
 KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 433
    L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]

        11. It appears that the outstanding dues of the Respondent-   A
   Company were 8.42 crores as on 31st March, 2006 and hence
   the load was not reduced. In the meantime, after the               ..
   amendment of Clause 4.49 of the Code, a letter was sent to
· the Respondent-Company on 4th October, 2006, asking it to
   submit a Bank Guarantee/Bond securing the amount of                B
   Rs.10.24 crores outstanding as arrears on that date. The
   Respondent-Company, accordingly, by its letter dated 17th
   June, 2007, submitted a Bond stating therein that the Company
   was agreeable to make payment of the arrears, if any, to
   KESCO upon the directions of the Court and the amount as           c
   was decided by the Courts. However, since the two affidavits
   and the Bond did not secure the outstanding dues of the
   Petitioners and were also not to its satisfaction, the load was
   not reduced. As indicated hereinabove, the Respondent-
 . Company, thereafter, filed Civil Misc. Writ Petition No.24900      D
   of 2009 before the Allahabad High Court.

        12. Learned ASG, _Mr. Parag Tripathy, appearing for the
  Petitioners, submitted that since neither the two affidavits nor
  the Bond filed by the Respondent-Company were acceptable
  to the Petitioners, the load was not reduced from 8 MVA to 1.25     E
  MVA, as requested, since securing the outstanding balance
  was one of the pre-conditions for such reduction. The learned
, ASG urged that since securing the amount payable was
  involved, neither the affidavits nor the Bond could guarantee
  recovery of the arrear dues in case of breach. It was further       F
  urged that even the unamended version of clause 4.49, on
  which the Respondent-Company relies, makes it very clear that
  either release of a new connection or the reduction or
  enhancement of loads would be subject to submission of either
  a Bank guarantee or Bond or any instrument to the satisfaction      G
  of the licensee (emphasis added). The learned Additional
  Solicitor General submitted that the High Court appears to have
  lost sight of the said condition and that the Petitioner-Company
  could not be compelled to accept the affidavits or Bond as
  security/guarantee for the arrears due.                             H
    434      SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A        13. The learned ASG then submitted that while the
    Respondent-Company had relied upon Annexure 6.5 to the U.P.
    Electricity Supply Code, 2005, the same only provides relief to
    Sick Industrial Companies and Relief Undertakings falling under
    Clause 6.16 of the said Code, which provides as follows :-
B
          "6. 16. Disconnected Industrial Units seeking revival: For
          industries lying disconnected over six months and seeking
          to revive, the Commission order dated 12th July, 2005
          given in Annexure 6.5, shall apply to the extent specified
          in the order, and if not contrary to any G.O., or any court
c         order."                     ·

  Mr. Tripathy urged that the said clause would not apply to the
  case of the Respondent-Company since it was not the case of
  a disconnected industrial unit seeking revival and hence no
D reliance could be placed on Annexure 6.5 to the above Code.
  It was also pointed out that although the load had not been
  reduced, as requested by the Respondent-Company, on 13th
  July, 2007, another request was made for increase of the load
  from 1.25 MVA to 2.25 MVA, which action was not permissible.
E
       14. The learned ASG submitted that till such time the
  provisions of Clause 4.49 were not complied with by the
  Respondent-Company, the question of reduction of the
  contracted load from 8 MVA to 1.25 MVA did not arise and
  the further request to increase the same to 2.25 MVA was also
F not maintainable. The learned ASG submitted that the approach
  of the High Court to the problem was completely wrong and
  cannot, therefore, be sustained.

        15. On the other hand, appearing for the Respondent-
G Company, Mr. M.L. Lahoty, Advocate, reiterated the
  submissions made before the High Court that on account of the
  deteriorating financial health of the Company and apprehending
  a further adverse effect on its work force, the State Government
  on 24th June, 2004, upon exercise of its power under Section
H 3 of the U.P. Industrial Undertakings (Special Provisions for
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 435
   L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]
Prevention of Unemployment) Act, 1966, issued a notification          A
granting the Respondent-Company the status of a "Relief
Undertaking". The notification, which was initially issued for a
period of one year, was subsequently extended for two
consecutive periods of one year each on 14th June, 2005 and
23rd June, 2006, respectively. The consequence of the same            B
was that all contracts, agreements, etc. stood suspended for a
period of one year and all proceedings pending before any
Court, Tribunal, Authority, etc. stood stayed.

     16. On account of the deteriorating market conditions and
suspension of most of its manufacturing activities, the               C
Respondent-Company applied for reduction of load from 8 MVA
to 1.25 MVA and made a formal application to KESCO to
reduce its load in the manner indicated above with effect from
1st April, 2006. The said application was in the prescribed
proforma under Clause 4.41 of the U.P. Supply Code, 2005.             D

     17. In order to prevent a stalemate, the Respondent-
Company sought the intervention of the Member Secretary
(Energy), U.P., regarding reduction of the contracted load from
8 MVA to 1.25 MVA on account of the market conditions.                E
According to Mr. Lahoty, this led to a meeting between the
Managing Director of KESCO and the Executive Director of
LML on 19th April, 2006, in which a decision was taken to
reduce the load from 8 MVA to 1.25 MVA, as requested by the
Respondent-Company, with effect from 1st April, 2006. The             F
said decision of load reduction was, of course, subject to the
condition that (i) LML would pay its monthly electricity dues, (ii)
both LML and KESCO would accept the decision on dues
pending in the Courts and (iii) the decision on load reduction
would be sent for approval to the Regulatory Commission               G
(UPERC), which would be acceptable to both the parties. Mr.
Lahoty contended that once a decision had been arriv~d at
between the Managing Director of KESCO and the Executive
Director of the Respondent-Company, KESCO ought not to
have_ raised inflated bills based on 8 MVA load thereafter.
    436     SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A       18. Mr. Lahoty urged that while the aforesaid controversy
  was continuing, on 8th May, 2007, the Respondent-Company
  was declared to be a "Sick Industrial Company" under Section
  3(1)(o) of SICA. In addition to the above, the BIFR also invoked
  its jurisdiction under Section 22(3) of SICA on 22.10.2007
8 directing that (i) against arrears, KESCO would continue to
  accept Rs.5 lakhs per month, (ii) current bills would be paid on
  actual consumption basis and (iii) KESCO would not resort to
  any coercive measures such as disconnection of supply.
  According to Mr. Lahoty, the Respondent- Company has been
c strictly adhering to the said order of the BIFR and has in the
  process already liquidated about Rs.3.09 crores of the
  outstanding dues. Mr. Lahoty reiterated that although the
  Respondent-Company had complied with the provisions of the
  Supply Code and also complied with the payment schedule as
  per the agreement dated 3rd August, 2007, and the order
0
  dated 22nd October, 2007, passed by the BIFR in the light of
  Annexure 6.5 to the Supply Code, KESCO went on raising
  monthly electricity bills on the basis of 8 MVA which compelled
  the Respondent-Company to file Writ Petition (C) No.24900 of
E 2009 before the Allahabad High Court, inter alia, for a direction
  upon the Petitioner-Company that the load stood reduced from
  1st April, 2006. It was submitted that all the submissions made
  on behalf of KESCO relating to the application for load
  reduction, were not in accordance with the provisions of the
  Code and in the absence of any stay order by any Court or
F Forum in respect of arrears, the provisions of Clause 4.49 was
  not fulfilled. However, all the issues raised by KESCO were
  negated by the Division Bench of the High Court in its
  impugned judgment. Mr. Lahoty submitted that having regard
  to the decision of the Rajasthan High Court in Modern Syntax
G (/)Ltd. Vs. Debts Recovery Tribunal, Jaipur [AIR (2001) Raj.
   170) which in its turn is based on the judgment of this Court in
    Doburg Lager Breweries Pvt. Ltd. Vs. Dhariwa/ Bottle Trading,
    Co. [(1986) 2 SCC 382], wherein it was held by this Court that
    the object of a Relief Undertaking Act is to sub-serve the public ·
H
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 437
   L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]

interest and to prevent unemployment in particular, the relevant     A
provisions are to be given a liberal interpretation.

      19. Mr. Lahoty also submitted that in clause 4.49 of the
Code prior to its amendment, there was an option of furnishing
a Bond and filing an instrument in the nature of a Bond, apart       8
from furnishing a Bank Guarantee and no fault could, therefore,
be found with the affidavits and the Bond submitted on behalf
of the Respondent-Company. It was submitted that since no
shortcoming or illegality was mentioned in the decision taken
by the Managing Director of KESCO and the Executive                  C
Director of LML and since the load reduction application was
to be considered as per the unamended Code, nothing further
was required to be done by the Respondent-Company after the
said decision was taken on 19th April, 2006. It was urged that
it was in the said context that the Division Bench observed that
KESCO's stand in raising the monthly bills on the basis of 8         D
MVA contracted load was wholly unjust and unfair, more
particularly when the Respondent No.1 Company was on its
part complying with the conditions of payment of the monthly
bills based on actual consumption and instalments towards the
arrears.                                                             E

     20. Referring to the exercise of power by the UPERC under
Section 23 of the Electricity Supply Act, 2003 and Clause 9.5
of the Supply Code, it was submitted that the same was a
separate regime in the larger public interest with the sole object   F
of preventing unemployment and loss of production in order to
serve a social cause. It is in that context that it was recorded
that only current dues were to be realized from a "Relief
Undertaking" or a "Sick Industry" from whom only current dues
would be realized and as far as the past dues are concerned,         G
the same would be recovered in e.qual monthly instalments. As
far as late payment sur-charge are concerned, the same would
be subject to the orders of the BIFR under the SICA or the State
Government under the 1966 Act. It was submitted that the said
provisions of paragraph 8(c) and (d) of Annexure 6.5 to the          H
    438    SUPREME COURT REPORTS                 [2010] 6 S.C.R.


A Code squarely applied to the case of the Respondent No.1
  Company after it was declared as a "Relief Undertaking" on
  24th June, 2004, and as a "Sick Industry" by BIFR on 8th May,
  2007, but with effect from 31st August, 2006.

        21. It was then submitted that even though KESCO was
8
  fully aware of the pendency of arrears, it decided to enter into
  an arrangement for load reduction as it was satisfied that the
  said decision was in the interest of both KESCO and LML and
  was warranted by the circumstances then existing. Since the
C arrangement was to the full satisfaction of KESCO it itself
  recommended to the Regulatory Body that KESCO's decision
  to reduce the load from 8 MVA to 1.25 MVA may be approved,
  notwithstanding the pendency of arrears. Mr. Lahoty submitted
  that being a public undertaking it did not lie in the mouth of
  KESCO to try to wriggle out of a conclusive decision which had
D been acted upon for at least four years.

       22. A further submission was made by Mr. Lahoty to the
  extent that Respondent No.1 Company had secured KESCO
  by an amount of Rs.64 lakhs approx. which was deposited by
E the Respondent No.1 Company as per Clause 4.20 of the
  Supply Code, and the same could be utilized by KESCO in any
  eventuality. When against the excess security deposit an
  amount of Rs.65 lakhs approximately was ~ound to be surplus,
  the Respondent-Company permitted KESCO to adjust the total
F amount of Rs.84 lakhs as late as in October, 2009, which would
  show the bonafides of the Respondent No.1 Company.

       23. Mr. Lahoty concluded his submissions by submitting
  that because of the financial hardship under which the
  Respondent No.1 Company was functioning, both the State
G Government as well as the BIFR had shown a great deal of
  concern and that the Respondent-Company is continuing to pay
  Rs.5 lakhs in monthly instalments towards arrears, along with
  the current dues, and that it was in no position to provide any
  Bank Guarantee as demanded by the Petitioners. Mr. Lahoty
H submitted that a public authority should not be allowed to exert
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 439
   L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]
pressure when the Respondent-Company was complying with A
its commitments and the order passed under Section 22(3) of
SICA by BIFR. Mr. Lahoty submitted that the Special Leave
Petition was without any merit and was liable to be dismissed.

     24. The facts of this case are relatively simple and
                                                                    8
straightforward. What is difficult to comprehend is the
inscrutable manner in which decisions arrived at in common are
sought to be negated on account of bureaucratic lethargy. The
case of the Respondent-Company, which is not denied on
behalf of the Petitioners, is that owing to market fluctuations the C
Respondent-Company had to put a halt to its manufacturing
activities and to make a representation to the State
Government for declaring it to be a "Relief Undertaking" under
the relevant provisions of the U.P. Industrial Undertaking
(Special Provisions for Prevention of Unemployment) Act, 1966.
Responding to the said representation, the State Government D
issued a notification on 24th June, 2004, suspending all
contracts, agreements and other instruments in force for a
period of one year leading to strikes and complete disruption
of the work of the Respondent No.1-Company, impelling the
Respondent-Company to apply to the Petitioners for reduction E
of the contracted load from 8 MVA to 1.25 MVA from 1st April,
2006. The materials on record indicate that as a result of such
representation a meeting took place between the Managing
Director of KESCO and the Executive Director of the
Respondent-Company on 19th April, 2006, wherein a decision F
was taken to reduce the load as requested by the Respondent-
Company with effect from 1st April, 2006, on certain terms and
conditions, which have been set out hereinabove in paragraph
18. Apart from the above, the Respondent-Company was also
declared as a "Sick Company" under SICA on 8th May, 2007, G
and an order was passed by BIFR under Section 22(3) of SICA
on 22nd October, 2007, inter a/ia, directing that KESCO would
continue to accept Rs.5 lakhs per month against the arrear dues
together with the current dues on the basis of the actual
consumption. What is of significance is that despite compliance H
    440      SUPREME COURT REPORTS                  [2010} 6 S.C.R.

A   by the Respondent No.1-Company with the said order the
    Petitioners continued to raise bi~ls on the Respondent-Company
    on the basis of 8 MVA load, although, it had agreed to reduce
    the same from 8 MVA to 1.25 MVA with effect from 1st April,
    2006.
B
        25. This case is an example of how a positive decision
  taken to help a struggling industry to find its feet can be scuttled
  by legalese, although, an agreement had been reached
  between the parties regarding payment of the arrears in
  instalments along with the dues, and despite the same being
C duly followed by one of the parties to the agreement. The threat
  to yet again disrupt its manufacturing operations looms large
  on the horizon on account of the inability of the Respondent
  No.1-Company to comply with the provisions of Clause 4.41
  read with Clause 4.49 of the U.P. Electricity Code, 2005. On
D 31st March, 2006, the outstanding dues of the Respondent-
  Company was Rs.8.42 crores and when Clause 4.49 was
  amended, the Respondent-Company was asked to submit a
  Bank Guarantee/Bond to secure the amount of Rs.10.24 crores
  outstanding as arrears on that date. In compliance thereof, the
E Respondent-Company duly furnished a Bond on 17th June,
  2007, which was not accepted by the Petitioners on the ground
  that it did not secure the outstanding dues of the Petitioner No.1
  and were not to its satisfaction. As a result of the above,
  although, the Petitioners were fully aware of the precarious
F financial condition of the Respondent-Company and having
  agreed to reduce the contract load from 8 MVA to 1.25 MVA,
  it refused to do so on the ground that the Bond provided did
  not secure the outstanding dues, resulting in a vicious circle of
  events. On the one hand, the high MVA load continued to
G contribute to the raising of high electricity bills, which the
  Respondent-Company was not able to pay, and, on the other
  hand, the Respondent-Company continued to suffer further
  financial losses on account thereof.

          26. An argument had been advanced on behalf of the
H
  KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 441
     L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.]
   Petitioners that in the unamended provisions of Clause 4.49, A
   provision had been made for the defaulting Company to furnish
   a Bond and as an alternative, to furnish a Bank Guarantee,
   apparently to assuage the aggravated economic conditions. In
   the amended provisions of Clause 4.49 the furnishing of a
   Bond by way of security was excluded. However, the discretion B
   not to accept such Bond always lay with the Petitioners, giving
   them the discretion not to accept the Bond furnished by the
   Respondent-Company. That is exactly what has happened in
   the instant case. While agreeing to give the Respondent-
   Company the benefit of a reduced MVA, the Petitioners had        c
   prevented the Respondent-Company from accessing such
   privilege by continuing to raise bills on the basis of the high
    MVA which the Respondent-Company apparently was unable
    to bear on account of its financial conditions. As a result,
    instead of helping the Respondent-Company to come out of its D
    financial crisis, the Petitioners have prevented the Company
    from doing so by refusing to lower the load from 8 MVA to 1.25
    MVA, as agreed upon. It is not the case of the Petitioners that
    the agreement which had been arrived at between the
    Managing Director of the Petitioners and the Executive Director E
    of the Respondent-Company, had been breached by the
    Respondent-Company. On the other hand, it has been
    categorically contended by the Company that it had scrupulously
    given effect to the said agreement as also the order of the BIFR
    dated 22nd October, 2007 upon the Respondent No.1-
    Company being declared a Sick Industrial Company under F
· . Section 3(1)(o) of SICA on 8th May, 2007.

       27. It is apparent that while passing the impugned order,
  the High Court lost sight of the said order of the BIFR and
  confined itself to the provisions of Clauses 4.41 and 4.49 of     G
  the U.P. Electricity Supply Code, 2005 framed under Section
  50 of the Electricity Code, 2003. If the Respondent No.1-
  Company is to revive, and, thereafter, suNive, a certain amount
  of consideration has to be shown, which was fully realized by
  the Petitioners themselves, but they allowed themselves to be     H
    442      SUPREME COURT REPORTS                    [201 OJ 6 S.C.R.


A tied up in knots over compliance with the provisions of Clauses
  4.41 and 4.49 which are Rules framed for application in special
  cases in order to help industries which had fallen on difficult
  days, to recoup its losses and to bring its finances on an even
  keel.
B
         28. There is no dispute that pursuant to an application
    made on 31st March, 2006 by the Respondent No.1-Company,
    praying for the reduction of the contract load from 8 MVA to
    1.25 MVA with effect from 1st April, 2006, a Meeting had been
    held between the Managing Director of KESCO and the
C   representatives of the Respondent-Company in which a
    decision was taken for reduction of the load with certain
    conditions. There is also no dispute that on the said date itself
    KESCO conveyed its agreement for reduction of load to the
    U.P. Electricity Regulatory Commission and sought its formal
D   approval and that no objection was raised by the Commission
    with regard to the said decision except to indicate that the said
    decision would have to be implemented strictly in accordance
    with the Electricity Supply Code, 2005. There is also no dispute
    that when the decision was taken on 19th April, 2006 to reduce
E   the contract load, the unamended version of Clause 4.49 of the
    Code was in existence and that the same provided for
    submission of either a Bank Guarantee or a Bond or any other
    instrument to the satisfaction of the licensee of the equal amount
    of pending dues. The only problem which has arisen is
F   KESCO's decision not to accept the Bond given by the
    Respondent-Company on the ground that it did not provide
    sufficient security for the outstanding dues. In the totality of the
    existing circumstances, of which KESCO was fully aware, the
    decision not to accept the Bond was not in accordance with
G   the decision arrived at on 19th April, 2006 to reduce the contract
    load from 8 MVA to 1.25 MVA. In fact, the Respondent-
    Company had been declared to be a Relief Undertaking by the
    State Government on an application dated 24th June, 2004.
    Furthermore, soon after the decision was arrived at to lower
H   the contract load, the Respondent-Company was also declared
KANPUR ELECTRICITY SUPPLY CO. LTD. & ANR. v. 443
   L.M.L. LIMITED & ORS. [ALTAMAS KABIR, J.)
                                                                     JI:
as a Sick Company on 8th May, 2007 and the BIFR, while :. A
considering the revival of the Respondent-Company by its order
dated 22nd April, 2007, directed KESCO to continue to accept
Rs.5 lakhs per month against the arrears apart from payment
of the current electricity bills on actual consumption basis and
also not to adopt coercive measures to disconnect the supply B
of electricity of the Respondent"Company. As indicated
hereinabove, the result of the continued insistence of KESCO
that a Bank Guarantee should be provided by the Respondent
No.1-Company in respect of its outstanding dues, had the effect
of negating the decisions to revive the Company.                           c
     29. We are, therefore, of the view that no interference is
called for in this petition in regard to the impugned order of the
High Court. The Special Leave Petition is, accordingly,
dismissed, but this will not prevent the Petitioner-Company from
taking appropriate steps against the Respondent-Company in                 D
the event the latter Company commits default in paying the
instalments as directed by the BIFR towards the arrears or in
respect of the current electricity bills.

       30. There will be no order as to costs.                             E
N.J.                         Special Leave Petition dismissed.